Perhaps I’ve been overruled: LIC chief

MUMBAI: Life Insurance Corporation (LIC) of India will work on conducting a valuation of its business as a precursor to its initial public offering. Addressing the media on Friday, LIC chairman M R Kumar said that the Life Insurance Corporation of India Act would need to be amended for the public offering. Interestingly last year, Kumar had voiced his opinion that the time was not ripe for an IPO. When asked about those comments, he replied, “What can I say, perhaps I have been overruled.”

The laws that would need to be changed include the ones on dividend distribution and creation of a separate fund. At present, LIC distributes 95% of its surplus to the policyholder and 5% to the government. The corporation also has a single controlled policy fund and there is no separate shareholders fund. LIC has been exempt from having a shareholder’s fund as all the policies it issues are guaranteed by the government. While most other listed companies have undertaken an exercise to calculate their embedded value (which is the present value of business that it has written), LIC is yet to do so.

On LIC’s performance, Kumar said that its market share in terms of the first-year premium and the number of policies as of January end stood at 80% and 77.6% respectively. LIC’s total income rose 17.8% to Rs 2.9 lakh crore as of September 2019 from Rs 2.5 lakh crore a year ago. Total assets of the corporation increased by 7.9% to Rs 32.3 lakh crore as of September 2019 from Rs 29.8 crore, he added.

Kumar said that the corporation has made a conscious decision to increase the share of individual regular premium policies, which has grown at the rate of 40%—the highest in recent years.

Overall, individual new business premium grew 17.48%, while the number of new policies sold jumped 29.4% to Rs 45,199 crore, taking the total policies sold to 1.9 crore, the chairman said. To comply with new Irdai regulations, LIC has modified its existing products with new features such as revised surrender value and extension of revival period from two years to five years. During FY2018-19, LIC generated the highest valuation surplus of Rs 53,214 crore, registering a growth of around 9.9% over the previous year and paid a dividend of Rs 2,611 crore to the government, again the highest in history.

Source: The Times of India